EuroWire January 2018

Transatlantic cable

fortunes of the British financial industry. Here are summaries of the first results (“Brexit and the City: Taking London’s Financial Pulse,” 20 th November): Commercial property. The picture here, compiled from data from Savills and Knight Frank, two of the biggest real estate firms in Britain, is mixed. The price of renting real estate in the City of London district has fallen by about five per cent since 2016, dropping from £77.6 to £73.4 per square foot, Savills said. But it also found leasing activity in the City of London to be 17 per cent above the long-term average in the first three quarters of 2017. In upmarket Canary Wharf, the former docklands, prices are unchanged compared with 2016, Knight Frank said. Savills added that for the first time since the global financial crisis the finance and banking sector is “out there looking for new office space in Canary Wharf.” The Underground. Here, again, the data tells two different stories. Every weekday more than 200,000 journeys are recorded at the two main tube stations – Bank and Monument – serving the City, making the stations among London’s busiest. The number of travellers going in and out of Bank and Monument fell by 2.7 per cent in the first eight months of 2017 compared with the 2016 statistics. But the number of people using the Canary Wharf station continues to rise. Bar and restaurant openings. So far, Brexit seems to be having no impact here. The number of venues applying for new licences to sell alcohol in the City of London hit a record high in the first eight months of 2017, according to data from the municipal local authority that runs the district. London City Airport. The number of people using London City Airport, close to Canary Wharf’s financial district and favoured by executives for flights to European cities and beyond, had an increase of only 0.9 per cent in passengers in the first six months of 2017. That compares with an average annual 10 per cent increase in the previous four years. The airport said that it has enjoyed record growth since 2012, but that its capacity is constrained at peak times and it is looking to expand. Hiring numbers. Morgan McKinley focuses on hiring staff in the finance industry. The recruitment agency found that 51,922 new financial services jobs were created in the first seven months of 2017, a 10 per cent drop from the same period of the previous year. This was the lowest number of jobs available since 2012. “Businesses are naturally hesitant to plan and execute growth hires due to the uncertainty around Brexit,” said Hakan Enver, a Morgan McKinley director. Jobs leaving London. Some 10,000 finance jobs will be shifted out of Britain or created overseas in the next few years if the UK is denied access to Europe’s single market, according to a Reuters survey of firms employing the bulk of workers in international finance. But, to Mr MacAskill, the findings suggest that the first wave of job losses from Brexit may be at the lower end of estimates by industry lobby groups and firms – “which could mean London will keep its place as the continent’s top finance centre, at least in the short term.” Dorothy Fabian – USA Editor

Among developments that have buoyed emerging Asian markets, the firm’s portfolio managers cited stable economies in the area; low global interest rates; government reforms that are gaining traction in several countries; and a recently weakening US dollar. Also, a damaging protectionist USA trade policy seems less likely. The managers say that improved earnings and cash flows – along with a pickup in global trade that is helping exporters – are key catalysts for the revival. Indeed, the better fundamentals even outweigh significant worry-points, notably the anxieties generated by North Korea. (“Despite Geopolitical Risks, Emerging Asia Forges On,” Fall 2017 Issue) With fears of a collapse in China’s economy and currency having receded (both having stabilised with more government stimulus), other players come into sharper focus. T Rowe Price called particular attention to India, whose market surge last year was driven by strong corporate earnings and optimism about structural reform. The recent elections and progress on the nationwide goods and services tax (GST) legislation promote confidence that Prime Minister Narendra Modi will advance his reform agenda. Citing very favourable demographics and an economy that in many ways is uncorrelated with the rest of Asia, Eric Moffett, manager of Price’s Asia Opportunities Fund, asserted, “In India all the stars are aligned now.” The report also took note of the “resilience” of South Korea, whose economic recovery, boosted by improving earnings and exports, has remained on track despite the North Korean threat. Domestic political turmoil also muddies the outlook, but the portfolio managers say they are encouraged by the progress made in South Korean corporate governance under newly installed President Moon Jae-in. † To be sure, there are acknowledged risks in Asia, including a still-possible move toward protectionism in USA trade policy, a sharp reacceleration of the Chinese economy, any retrenchment on reform efforts, and an unexpected strengthening of the dollar. But, said Mr Moffett: “Long term, we’re just very struck by how strong the potential is for the region to grow.” He further pointed out that it is not over-owned by investors – “so there is a lot of opportunity for Asia ahead.” Will Britain’s decision to leave the European Union damage one of its most successful industries? Reuters is not so sure “The financial services sector, which accounts for about 12 per cent of Britain’s economic output and pays more tax than any other industry, potentially has a lot to lose from the end of unfettered access to the EU’s post-Brexit market of 440 million people.” Andrew MacAskill of Reuters was stating the conventional wisdom about the financial centre of London known for centuries as “the City” – before going on to challenge it. According to Reuters , some 17 months after Britons voted to leave the European Union [there are] “signs of a slowdown, but no transformative decline.” Itself headquartered in London, the international news agency created a tracker to monitor six indicators for assessing the Brexit

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January 2018